Crude Oil Inventories Rise Less than Expected

This week's report on Energy Inventories from the EIA showed a smaller than expected build in crude oil stocks (778K vs. 1910K forecast). Gasoline and distillate stocks, however, posted larger than expected builds. In addition, even though the build in crude oil stocks was less than expected, current levels are well above their historical averages. While oil prices were down heading into the report, prices have dipped further following the release.

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Comments

[Mad Hedge F...:]

ndt If you think oil is expensive here at $80, look again. The Department Energy chart below of US oil consumption per unit of output shows that, in fact, we are at a 40 year low in the price of crude. In other words, it takes half as much oil to produce a unit of GDP than it did in the late sixties, when 12 miles per gallon was considered reasonable, and only Lincoln Continentals got abused because they consumed a gluttonous six miles per gallon. This is the why current lofty prices are having a negligeable effect on a reviving economy. The other chart shows the price of oil in inflation adjusted terms. Again, we are at the high end of the range, but nowhere near the top. What’s the lesson in all of this? If the price of oil is not hurting now, then it will move a lot higher to where it does hurt big time. When the US gets back on track, and the emerging markets return to firing on all 12 cylinders, triple digit oil is a gimme, and new highs will easily be attainable. Then you can expect the current perfect correlation between rising stock and crude prices to shatter. Make sure you maintain exposure to the oil patch, either through majors like Chevron (CVX) (click here ), oil service companies like XTO Energy (XTO) (click here ), the Russian market ETF (RSX) (click here), or just the plain vanilla Oil Trust ETF (USO). If noting else, these names will help immunize your portfolio against the certainty of higher fuel prices. If you are wondering where the “W” recession might come from, this is it.

Oct 28 12:09 PM

[sethmcs:]

Here is a possibilty. High oil prices cause a double dip recession and oil goes down with it as well as emerging economies. Dollar recovers and the market tanks. Triple digit oil? Forget it. Unless you want single digit oil shortly thereafter.

Oct 28 02:01 PM

[jerrydd:]

sethmcs

Whether you want it or not triple digit oil will be here by spring. The only way it won't is if we, the rest of the world put a straight carbon tax on it. Either way oil is going up retail. The only difference is whether the US gov gets it or Iran, Russia, oil dictators, oil companies do.

If the gov taxes it most of it will be paid by the above through lower oil prices.

Oct 29 12:51 PM

[a. palmer jr.:]

If oil does go to triple digits it will be the best thing that could happen to us. Worse thing would be for oil to remain low and gasoline to go below $2 a gallon. The reason I say this is because low oil prices will tend to stifle our transition to alternate fuels. It's time to start saying good-by to gasoline and start getting on with the other alternates. It's time to stop financing our enemies war machine.

Oct 29 10:08 PM